Don’t put that GIC in your TFSA

Transferring it simply isn’t worth the effort

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From the November 2015 issue of the magazine.

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Q: Can I transfer a small locked-in GIC, which is about to mature, into a TFSA?

—D. Godfree, Toronto, ON

A: Why on earth would you want to do that, I ask with tongue firmly planted in cheek.  Surely it isn’t because you hope the long arms of the Canada Revenue Agency won’t try to tax the interest on the GIC. Well, whatever the reason behind your question, here is the answer: Most GICs can be transferred into your TFSA, but the requirements differ depending on which financial institution you’re working with. For example, “If the GIC is solely issued by one particular institution or division of that bank, then it is not transferable,” says Tim Raposo, Senior Financial Planner, TD Wealth Financial Planning. But even if you can do it, are you sure it is worth the effort?

You’ll need to track and report the interest you earned during the time the GIC was outside of the TFSA. Raposo explains that, “if you opened a GIC in January and kept the money invested in the GIC until October, but then decided to transfer the money into a TFSA in November, you would need to report the interest that was accrued from January to October on your tax return.”  Your bank won’t likely issue a T5 for that period because the GIC matured inside your TFSA, so you’ll need to haul out your calculator. I’m a big fan of simplicity, and for a small amount, I would keep it simple and just wait until the GIC matures.

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